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LOU DOBBS TONIGHT

Iraqi Troops Stood Up and Stumbled Badly In One Part of Iraq; Secretary of State Condoleezza Rice Declared United States Is Willing To Use All Military Force To Defend Japan; Immigrants Sending Back $45 billion a Year to Latin America; One of Greatest Challenges Facing Middle Class Americans Is Job Insecurity; Michael McCaul Interview

Aired October 18, 2006 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


LOU DOBBS, CNN ANCHOR: Tonight we're coming to you live from Kansas City, Missouri. Tonight one of the worst days for our troops in the entire war in Iraq. Ten of our soldiers and Marines killed in a single day.
We'll have that special report from the Pentagon.

And stunning new developments in the case of two U.S. Border Patrol agents who are facing up to 20 years in jail for shooting a Mexican drug smuggler. And was there jury misconduct in the agents' trial.

We'll have the answers and the report, a great deal more straight ahead here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion for Wednesday, October 18th.

Live from Kansas City, Missouri, Lou Dobbs.

DOBBS: Good evening, everybody.

We're broadcasting tonight from just outside the Uptown Theater in Kansas City. We'll be reporting on the escalating war on our middle class and the rising anger of voters with Congress, corporate America, and the special interests dominating our political system. And we'll be holding a very important town hall meeting with middle class families.

But we begin tonight with a sharp increase in the number of our troops killed in Iraq. Insurgents have killed 11 more of our troops, 10 of them in a single day -- 2,783 of our troops have been killed since this war began.

The Bush administration is also trying to deal with the escalating nuclear threat from communist North Korea. Secretary of State Condoleezza Rice today said the United States could use nuclear weapons to defend Japan.

Jamie McIntyre tonight reports from the Pentagon on more evidence that the U.S. strategy in Iraq is failing.

Aneesh Raman reports from Tokyo on the nuclear confrontation with North Korea.

And Kathleen Koch, traveling tonight with the President Bush in North Carolina, reports on the White House response to the latest developments in both Iraq and North Korea.

We turn first to Jamie McIntyre at the Pentagon -- Jamie.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Lou, you've heard the strategy many times: U.S. troops will stand down as Iraqi troops stand up. Well, in one part of Iraq, Iraqi troops stood up and stumbled badly.

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): For five days Shia militiamen conducted a rain of terror in Balad, a largely Shia city turned over to one of Iraq's premier brigades under the U.S. strategy of standing up Iraqi forces to replace American troops. As U.S. forces remained in their fortified base nearby, Iraqi troops failed to stop the killing of up to 100 Sunnis.

It was a failure of a critical test for Iraqi forces, a failure foretold by Defense Secretary Donald Rumsfeld last week, almost as if he knew the plan to turn over large areas of the country to Iraqi control was tenuous at best.

DONALD RUMSFELD, SECRETARY OF DEFENSE: Some even might go and not work out and have to be taken back, fixed, and then given back to the Iraqis at some point.

MCINTYRE: The other lynchpin of the current U.S. strategy, securing Baghdad first, has also taken a deadly turn. Ten American deaths in a single day has pushed the U.S. casualties to the highest monthly rate since the war began. And along with improvised bombs, increasingly sniper attacks, as shown in this graphic video obtained from insurgents, are exacting a real and psychological toll as a weapon of terror against U.S. troops.

In a speech to the Air War College at Maxwell Air Force Base, Alabama, Defense Secretary Donald Rumsfeld acknowledged the war is not going well but again urged patience.

RUMSFELD: This war, like other wars, has not been a steady, smooth, upward path. To some that's a surprise. To those who study history, it is not a surprise.

MCINTYRE: Speculation is swirling about what the bipartisan Iraq Study Group, led by former secretary of state James Baker, might recommend next month. But experts say none of the options from a phased withdrawal to staying the course are very appealing.

AMB. JAMES DOBBINS, RAND CORPORATION: Well, it's a dilemma. Our presence is an incitement to violence, but our absence might be an invitation to even greater violence. And it's possible that an incipient civil war that's being conducted at an unconventional level at the moment could turn into a more widespread conventional civil war with much higher levels of casualties.

(END VIDEOTAPE)

MCINTYRE: One more sign the war is not slowing down, Marine officials tell CNN that Defense Secretary Rumsfeld has signed off on a contingency plan that would send Marine reserve units, not just active units, but reserve units back to Iraq for a second tour if needed -- Lou.

DOBBS: Jamie, thank you very much.

Jamie McIntyre reporting from the Pentagon.

Most of our troops killed in Iraq are being killed by improvised explosive devices or IEDs. The roadside bombs have become increasingly sophisticated since the war began. And our troops are stepping up their efforts to try to detect, of course, those bombs before they do explode.

Arwa Damon is with our troops in the 10th Mountain Division, and she's reporting from the region of Iraq that has earned the title "Triangle of Death".

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN CORRESPONDENT (voice-over): This is the type of terrain that really makes you feel like each step could be your last. It has been for four American soldiers killed on this mission in the past two weeks. The tall reeds make it easy for insurgents to hide. The thick mud so slick it's like walking on ice. And somewhere beneath the tumbleweeds and brush along the canals less than an hour outside of Baghdad in an area known as the "Triangle of Death," lies what these men call a Wal-Mart of weapons.

UNIDENTIFIED MALE: I'm seeing a lot of these directional charges (INAUDIBLE).

DAMON: These soldiers are about to discover they arrived just in time.

UNIDENTIFIED MALE: It's not a good day when you get hit with one of those. That's just a (INAUDIBLE).

DAMON: To the untrained eye, it seems like there is nothing lurking here, but Captain Shawn Finn and his company have quickly learned the little things to look for.

UNIDENTIFIED MALE: This berm right before we get to the (INAUDIBLE), there's footprints in the mud. It shows that they've been walking in here to provide concealment. When they get to the road they'll lay the IEDs in.

DAMON: The intent, to tighten the noose on an insurgency that has literally dug itself in.

UNIDENTIFIED MALE: What we'll notice a lot is there will be, like, fresh green shrubbery like that. That's some of the larger berms, lots of green stuff. Then we'll find this stuff, you know, piled up like tumbleweeds. Kick it out of the way, you dig in about six inches, that's where we're finding the barrels.

DAMON: Captain Finn says it's been on-the-job training.

UNIDENTIFIED MALE: It's hanging off the reed here. It broke off. We found one about 50 meters away, so these are the types of things we look for.

DAMON: Soon, as the men continue to move forward, the insurgents' methods reveal themselves. First they find the spotter's position.

UNIDENTIFIED MALE: Like an observation post, you know. A one- man element who's going to come pull security, or over -- watch -- full security for a guy that's putting an IED on that main road.

DAMON: Farther down, they pull up wiring. Another short distance away, they dig up plastic explosives. Mortar rounds are buried under the tumbleweed. All the parts in place to assemble IEDs at any moment right in this field.

UNIDENTIFIED MALE: They've got the explosives in. They got the wire in, and probably within the next 12 hours undercover of darkness they'd recede the road with the IEDs.

DAMON: The final component hidden across the street.

(on camera): These are all IED roadside bomb trigger devises. They are quite primitive yet highly effective.

This, for example, is the timer off of a washing machine. Once the timer has been set, the IED is ready to detonate.

(voice-over): Since this operation began two weeks ago, the U.S. has found enough material for at least 1,000 roadside bombs.

UNIDENTIFIED MALE: I can't wait to do it again, find some more stuff.

DAMON: Arwa Damon, CNN, near Yusufiyah, Iraq.

(END VIDEOTAPE)

DOBBS: And for more now on the escalating nuclear confrontation with North Korea, let's turn to my colleague Kitty Pilgrim in New York -- Kitty.

KITTY PILGRIM, CNN ANCHOR: Thank you, Lou.

Tonight, Secretary of State Condoleezza Rice will travel to Seoul for urgent talks about the North Korean nuclear crisis. In Tokyo, Rice declared the United States is willing to use all its military force to defend Japan. She left little doubt the United States would use nuclear weapons if necessary. Aneesh Raman reports from Tokyo -- Aneesh.

ANEESH RAMAN, CNN CORRESPONDENT: Kitty, good evening.

The importance of those statements by Secretary Rice cannot be overstated from the viewpoint of the Japanese government as they face an increasing threat from a nuclear North Korea. Amid suggestions North Korea could do a second nuclear test for Japan, the U.S. really is the first line of defense.

This is a country with a pacifist constitution, a country with over 35,000 U.S. troops here. And those words by the secretary of state leaving little doubt that a nuclear weapon could be used by the U.S. to defend Japan is key because it quells debate within the Japan as to whether it should obtain a nuclear arsenal of its own. That would undoubtedly spark an Asian arms race.

Here are the very explicit words from Secretary Rice earlier today.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: I reaffirm the president's statement of October 9th that the United States has the will and the capability to meet the full range. And I underscore "full range" of its deterrent and security commitments to Japan.

(END VIDEO CLIP)

RAMAN: Kitty, this was a friendly first stop for Secretary Rice. Japan and the U.S. key allies. They see virtually eye to eye as to what to do with a nuclear North Korea in terms of sanctions.

From here things get a bit more die key. She heads within hours, as you mentioned, to South Korea. Within a day or so to China.

Those two countries have been less than exhaustive in enforcing those U.N. sanctions, especially in checking all cargo coming into and out of North Korea for anything that could aid that country's weapons program. Japan and the U.S. are keen to get both South Korea and China on board, present a unified front against the growing threat of a nuclear North Korea -- Kitty.

PILGRIM: Thanks, Aneesh.

Aneesh Raman reporting from Tokyo.

Well, tonight the White House is closely monitoring events in both North Korea and Iraq. The White House said President Bush has no intention of changing his strategy in Iraq.

Kathleen Koch is traveling with the president in Greensboro, North Carolina.

Kathleen, what is the White House saying about the war in Iraq tonight? KATHLEEN KOCH, CNN CORRESPONDENT: Well, first of all, Kitty, the White House is very carefully watching the mounting U.S. casualties in Iraq. Iraq is certainly a very important issue in the midterm elections, now less than three weeks away.

And already, the most recent CNN poll released just earlier this week showed some 64 percent of Americans, the highest number since the war began, now oppose the war. And that same number also disapprove of the job that the president is doing in handling the war.

Still, as you mentioned, Press Secretary Tony Snow said today that these new casualties are not going to cause the administration to rethink its strategy, saying, "The strategy is to win. The president understands not only the difficult of it, but he grieves for the people who have served and served with valor. But as everybody says, correctly, we've got to win. And that comes at a cost."

Though certainly the White House is very aware of the fact that these mounting casualties will only further erode the remaining support for the war -- Kitty.

PILGRIM: Thanks very much.

Kathleen Koch.

Still to come, new doubts about the trial of two Border Patrol agents. They could face up to 20 years in jail for shooting a Mexican drug smuggler.

Also, U.S. banks are helping immigrants and illegal aliens send billions of dollars out of this country.

And rising job insecurity all across the country as the war on the middle class escalates.

Plus, at 7:00 p.m. Eastern, our LOU DOBBS TONIGHT special, "America Votes 2006: War on the Middle Class."

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Tonight on "Broken Borders," a new study says tens of billions of dollars are flooding out of this country and into Latin America as this nation's illegal alien crisis deepens. And there are new charges of jury misconduct in the case of two Border Patrol agents set to be sentenced tomorrow for shooting a Mexican drug smuggler.

Bill Tucker reports on the country's widening remittance crisis. It's fueled by U.S. banks and our very own Federal Reserve.

And Casey Wian reports on growing calls for a new trial in the case of Border Patrol agents Jose Compean and Ignacio Ramos.

We begin with Bill Tucker -- Bill. BILL TUCKER, CNN CORRESPONDENT: Kitty, today's report by the Inter-American Development Bank reports that immigrants to this country, both legal and illegal, are sending back an eye-popping $45 billion a year to Latin America.

(BEGIN VIDEOTAPE)

TUCKER (voice-over): The latest look at money sent back to Latin American countries offers the biggest clue as to why the United States has an illegal alien crisis. A survey of more than 2,500 legal and illegal immigrants from Latin America found that more than half didn't have jobs when they left their countries, yet they found a job here within one month. The average starting salary, $900 a month, or six times the amount they would have earned in their home country.

DONALD TERRY, MULTILATERAL INVESTMENT FUND: These are people who make on average about $30,000 a year or less. We're talking about the chamber maids, we're talking about the parking attendants, we're talking about the people who clean tables.

TUCKER: Three-quarters of all legal and illegal immigrants from Latin America send money back to their home country. The dollars are flowing from every state.

Ten states are each sending back more than $1 billion a year to Latin America. These 10 states alone saw more than $35 billion drained from their economy and pumped south of the border. Mexico is the largest beneficiary.

Banks in the United States are aggressively encouraging the transfer of that money by reducing fees involved. Critics of this vast transfer of wealth point out that what these remittances amount to are unofficial and unhealthy forms of foreign aid.

DAN STEIN, FED. FOR AMERICAN IMMIGRATION REFORM: Remittances are distorting the economies in both countries. They foster political corruption in Mexico and they prevent needed reforms. It is a bad, bad system, and we need to start clamping down on the major players that are promoting it.

TUCKER: There's little chance of that happening. It's big business for banks. And the U.S. Federal Reserve just announced its program to help Mexican illegal aliens send money home.

(END VIDEOTAPE)

TUCKER: But there does seem to be some growing awareness of the dangers posed by remittances. Just recently, Mexico's Central Bank governor and one of the country's leading industrialists openly became critical of their country's alliance on remittances, money sent back to that country from working poor essentially here in the United States -- Kitty.

PILGRIM: That's the first time they've been addicted to it up until now.

TUCKER: Yes.

PILGRIM: Thanks very much.

Bill Tucker.

Well, Border Patrol agents Ignacio Ramos and Jose Compean are scheduled to be sentenced tomorrow in Texas. They were convicted of shooting a Mexican drug smuggler who testified at their trial and then was allowed to walk free.

Well, tonight there is new evidence that a major miscarriage of justice has taken place in their case.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Border Patrol agents Jose Compean and Ignacio Ramos are scheduled to be sentenced Thursday to at least 10 years in prison. Last year, they pursued this van loaded with 743 pounds of marijuana and driven by a Mexican drug smuggler.

There was a struggle. The smuggler was shot in the buttocks. Their case has sparked nationwide outrage because the Justice Department granted the drug smuggler immunity from prosecution, yet through the book at agents risking their lives to secure our borders.

Now attorneys have filed a motion for a new trial because three jurors allege jury misconduct.

IGNACIO RAMOS, BORDER PATROL AGENT: Well, it was exciting to hear these jurors did come forward. It keeps us hopeful and it makes us feel good. Of course, you know, we don't want to say we look forward to tomorrow.

WIAN: The jurors, including a woman we interviewed in August, say they were originally not convinced of Ramos and Compean's guilt. They say they were told by another more experienced juror that a mistrial was not an option.

UNIDENTIFIED JUROR: I remember being in the jury room talking with the other jury members, crying. I remember when the verdict was read. It felt like I was going to go through the floor.

WIAN (on camera): Why were you crying?

UNIDENTIFIED JUROR: I think because I felt like I had made a decision and it was probably a wrong decision, but I had to make a decision.

WIAN (voice-over): The next day, several members of Congress, including Judiciary Committee chairman James Sensenbrenner, promised hearings before the end of the year to investigate the Justice Department's prosecution of the agents. And just last week a half- dozen members wrote to Attorney General Alberto Gonzales asking him to drop the charges. They say the case sets a dangerous precedent for law enforcement officers trying to perform their official duties.

The Justice Department has not responded. Federal prosecutors say they don't expect a juror misconduct motion to affect the agents' sentencing.

(on camera): If their conviction stands, Ramos and Compean hope the judge will allow them to remain free on bail with their young families while the verdict is appealed. There's also a chance they could be taken to jail immediately.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: Still ahead, the shocking congressional report that says Hezbollah terrorists have already crossed into the United States from Mexico. I'll speak to Congressman Michael McCaul, whose subcommittee released this report.

Plus, middle class Americans are seeing their job security vanish. Lou will be back live from Kansas City with that special report.

The White House says the economy is great. Middle class Americans tell a different story. We'll bring you the results of our exclusive poll.

And we're just over half an hour away from our LOU DOBBS TONIGHT special, "America Votes 2006: War on the Middle Class". It all begins at 7:00 p.m. Eastern, so stay with us.

(COMMERCIAL BREAK)

DOBBS: Welcome back to Kansas City.

One of the greatest challenges facing middle class Americans today is job insecurity. Millions of good-paying jobs have disappeared. Many middle class Americans who still have jobs worry that those jobs are about to end.

Lisa Sylvester reports from Louisville, Kentucky.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Wane Clem's life has revolved around the Ford Motor Company in Louisville, Kentucky.

WAYNE CLEM, FORD EMPLOYEE: I just always wanted to work for Ford when I was a kid, you know, living on a farm. And so I came up here and asked for a job and they put me to work. And I've been there 43 years later.

UNIDENTIFIED MALE: All right. I'll take a little piece of pumpkin. Just a little.

SYLVESTER: He raised his family, providing middle class comforts. But his adult children are finding it's harder now to maintain that lifestyle.

His daughter Tammy Plamp has worked at the Ford plant for 11 years. His son Mike, seven years. In recent months, the auto company began massive cutbacks and can only afford to keep them on for two weeks at a time.

TAMMY PLAMP, FORD EMPLOYEE: We're not getting any overtime. It's none, and then now we're being laid off. So, as far as the money, it's totally changed.

SYLVESTER: Mike and his family are familiar with uncertainty. He served a year in Iraq in the Army National Guard. But now he's facing a different kind of worry, job insecurity.

MIKE CLEM, FORD EMPLOYEE: The U.S. economy, the people are dividing. You have the rich and the poor. And for some reason, the middle class, which has made this country run for years, is dwindling down.

SYLVESTER: Economists tend to define the middle class by aspirations, able to afford a decent home, health insurance, and put the kids through a public college. By those measures, many middle income families are just not making it.

JARED BERNSTEIN, ECONOMIC POLICY INSTITUTE: The median household and the income of the typical household right in the middle of the income scale. Clearly, a middle class household is down over five percent in real terms. That's $3,000. And that's real money.

SYLVESTER (on camera): And it's not just manufacturing workers who are feeling the squeeze. Many middle class professionals are sharing the same worries, how to pay the bills, rising college costs, saving for retirement, and an increase in health care spending.

(voice-over): For Wayne Clem, the middle class squeeze extends not just to his adult children, but his grandchildren. He worries with plant closures and U.S. jobs looking bleak what middle opportunities will be left for them.

Lisa Sylvester, CNN, Louisville, Kentucky.

(END VIDEOTAPE)

DOBBS: The Clem family will be among those families who will be joining us in the next hour during our town hall meeting here in Kansas City, during our special report, "America votes 2006," tonight, "War on the Middle Class".

Now we're going back to New York and Kitty Pilgrim -- Kitty.

PILGRIM: Thanks, Lou.

Now for tonight's poll. How would you rate the government's handling of the middle class crisis in this country? Excellent, fair or poor?

Cast your vote at LouDobbs.com. And we'll bring you the results a little bit later in the broadcast.

And time now for some of your thoughts.

And William in Washington, D.C., writes to us, "I do not believe our huge population is lowering the standard of living for the middle class. The middle class standard of living is falling, but it is primarily due to war, huge trade imbalances, huge national and personal debt, and inflation."

Joseph in New York writes to us, "We must secure our borders and control our population growth, or I might have to go to Mexico to get my old job back."

And Dan in Illinois writes, "My family is lower middle class. Student loans are crushing us as we are about to bring our first child into this world. It looks like we may not be able to afford our modest $100,000 home anymore. Who in the government cares for the average family like mine anymore?"

Do e-mail us at LouDobbs.com. And we'll have more of your thoughts a little bit later in the broadcast. And each of you whose e-mail is read here will receive a copy of Lou's new book, "War on the Middle Class".

And for more on Lou's thoughts about the middle class crisis in this country, please be sure to take a look at his commentary today on LouDobbs.com.

In Arizona tonight, school officials are fighting mad over a new report that says Arizona is the dumbest state in the nation. Now, this report was released by the Morgan Quitno Press. And it says, "When you factor in graduation rates, test scores, and other factors, Arizona ranks as the least smartest state."

Now, Arizona disagrees. It calls the Morgan Quitno Press the "stupidest company in the nation."

Still ahead, a disturbing new report on the deepening border crisis in this country. Congressman Michael McCaul will join me to discuss the report and what he says needs to be done now.

Also, a sobering look at how Americans feel about their economic situation and the future. More Americans now say the American dream is simply that, just a dream.

Also, I'll be joined by three of the country's sharpest political minds to discuss the middle class crisis, the upcoming elections, and a whole lot more.

We're now just 30 minutes away from Lou's special tonight, "America Votes 2006: War on the Middle Class". And that begins at 7:00 p.m. Eastern. You won't want to miss this very important program.

(COMMERCIAL BREAK) ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion for Wednesday, October 18th. Live from Kansas City, Missouri, here again, Lou Dobbs.

DOBBS: Welcome back to Kansas city. This evening, it's turned out to be a windy and cold Kansas City. We're here on the frontlines of what has become a war on our middle class. Tonight, we'll see how Americans are looking at Congress, what they think of Congress and this administration. We'll have that special report, a great deal more, but first, the latest headlines.

PILGRIM: Actor Wesley Snipes has failed to turn himself in one day after he was indicted for tax evasion and fraud. The film actor was charged with bilking the government out of $12 million in bogus refund claims and failing to file tax returns for six years. If convicted on all counts, he could face a maximum 16 years in prison.

Well, the death toll in last week's surprise snowstorm in the Northeast is now 12 people. Power outages continue. More than 100,000 customers are still without electricity nearly a week after two feet of snow buried western New York. Cleanup continues around the clock. Officials in the Buffalo area expect schools to remain closed until next week.

Federal officials have announced a major money laundering bust. Twenty-six people were arrested in three countries: Colombia, the United States and great Britain. Officials also seized more than $16 million in cash and illegal drugs. Agents say the suspects helped launder billions of dollars for Colombian drug dealers.

A warning tonight that some video iPods are infected with a virus. Apple Computer says the problem involves video iPods shipped after September 12th and only those using the Microsoft Windows Operating System. Apple says the machines being shipped now are clean but Apple and Microsoft officials are bickering over who's to blame for the virus slipping through.

Now, for more on the middle class crisis, we go back to Lou Dobbs in Kansas City, Missouri -- Lou.

DOBBS: Thank you, Kitty.

A new poll out tonight shows that -- are you ready -- Americans are fed up with Congress. They see Congress as unwilling to fight for American's middle class and the Bush administration in this poll not faring so well either. Bill Schneider has our report.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Many Americans feel like the man who is about to drown crossing a stream that on the average is three-feet deep. On the average, the economy's doing well.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The budget numbers are proof that pro-growth economic policies work.

SCHNEIDER: But not for people who feel themselves slipping under water.

MARIO CUOMO (D), FORMER NEW YORK GOVERNOR: The people who are really doing well in this country now are the very wealthy people and not the working middle class. That's slipping.

SCHNEIDER: In a new CNN poll conducted by the Opinion Research Corporation, a majority of Americans say the American dream has become the impossible dream for most people. Those with no college degree have lost faith in the American dream.

College graduates still believe, but only about 30 percent of Americans have finished college. There's a lot of middle class frustration out there, and it's focused on Washington. Even Republicans are running against Washington.

UNIDENTIFIED MALE: I know what you're feeling. Washington has no clue what's going on in your life.

SCHNEIDER: About three-quarters of the public sees Congress as out of touch with average Americans, about the same as in 1994, the last time voters overthrew the majority in Congress.

But it's not just Congress. Nearly 80 percent of Americans feel big business has too much influence over the Bush administration. Democrats are nearly unanimous in that sentiment.

UNIDENTIFIED MALE: In Washington, we have a White House that has rolled over for the oil companies.

SCHNEIDER: As it happens, most Republicans also feel that way, a rare instance of bipartisan agreement.

(END VIDEOTAPE)

DOBBS: Bill Schneider reporting on that poll. Bill, by the way, will be joining us here in Kansas City for our "America Votes 2006: War on the Middle Class" special and town hall meeting. He'll have much more on what's driving the anger against Congress and the administration. All of that coming up at 7 p.m. Eastern tonight at the top of the hour.

Up next, an alarming new congressional report showing radical Islamist terrorists have entered this country across our border with Mexico. Congressman Michael McCaul, whose committee wrote the disturbing report, joins us, and three of the country's top political analysts join us as well. They'll share their thoughts about these upcoming midterm elections and a great deal more.

And please stay with us. At the top of the hour, our town hall meeting and special report on "War on the Middle Class," 7 p.m. Eastern. We'll be right back.

(COMMERCIAL BREAK)

PILGRIM: Tonight, a disturbing congressional report says anarchy and violence are spreading along the Mexican border and deep into the United States. Now, this report says Mexican drug traffickers have achieved shocking levels of sophistication in their battle with our Border Patrol. The report also says Hezbollah terrorists have already crossed the Mexican border into this country.

Joining me now, the chairman of Homeland Security Subcommittee on Investigations, Congressman Michael McCaul, and his subcommittee released this report.

I have to say, Congressman, this is really shocking stuff, when I read it. It's really disturbing. Let me bring our viewers up to speed on some of the statistics here. And here are some of the numbers. We'll just bring them up.

In 2005, 1.2 million illegal aliens caught by the Border Patrol, 165,000 were from countries other than Mexico, 650 from special interest countries, special interest countries being countries that have terrorism links. Were you surprised at the magnitude of this problem?

REP. MICHAEL MCCAUL (R-TX), HOMELAND SECURITY CMTE.: Not terribly surprised, but very disturbed by the findings. What we found was that the drug cartels have never been more powerful or more violent south of the border. They literally own these delivery routes, these vehicles that export drugs and crime into this country. Human trafficking, as you mentioned, the other than Mexican special alien concern has tripled since September 11.

It causes me grave concern, and I think the thing that keeps all of us up late at night in the Congress is -- god forbid -- these routes are used for weapons of mass destruction to come across our border.

PILGRIM: Yes, especially the terrorism element. We have some more statistics on that, which I would like to share with our viewers. In 2003, more than 30,000. In 2004, more than 44,000, five more than 185,000. So far in 2006, more than 108,000.

And the other fact that struck my eye was we believe we are catching only 10 to 30 percent of people coming across the border. So there may be many more slipping through. How concerned are you that we are not stopping terrorism properly?

MCCAUL: Well, as a former counterterrorism official at the Justice Department, I've always been concerned about this threat. The last week in the Congress, we did appropriate billions of dollars for border security to take care of this problem on our side of the border with more agents and fences and technology.

But we really need to -- Kitty, we need to look at the root cause of this problem, and it is the drug cartels. They are the head of the snake and the snake needs to be eradicated. We need far greater cooperation with the Mexican government.

We need to enhance our intelligence capabilities, not only in Mexico, but through Latin America in countries like Venezuela, which has been a safe haven for the Islamic jihad world. We all know Margarita Island has hosted Hezbollah operatives for quite some time. Maybe that's a little well-known secret in the intelligence community. But our report bears out the stark reality.

PILGRIM: You know, you bring up the issue of Venezuela and the report says this about Venezuela. The "U.S. military and intelligence officials believe that Venezuela is emerging as a potential hub of terrorism in the Western Hemisphere. The Venezuelan government is issuing identity documents that could subsequently be used to obtain a U.S. visa and enter the country."

We know that these cartels that are smuggling people in and out. There's often a name change, that people will come in under an assumed name and try to represent themselves as a different nationality. Venezuela has objected to this characterization, but what makes you convinced that it's true?

MCCAUL: Well, we know that five Pakistanis were apprehended at the U.S./Mexico border with fraudulent Venezuelan documents. FBI director Robert Mueller basically testified before our committee that Islamic individuals were changing their surnames and taking on Hispanic identities with false documents.

If this doesn't wake anybody up, I don't know what would. And all we need to do is look at Mr. Chavez's comments that he has made publicly as he has embraced the Islamic jihad world and called them the brotherhood. He has embraced Iran, he has embraced Syria, he has endorsed Tehran's nuclear weapons program. And when you look at the threat of proliferation, as Iran is trying to develop nuclear weapons and nuclear material, it puts the threat now in our own hemisphere, indeed in our own backyard. I don't think we can turn a blind eye to this problem anymore.

PILGRIM: Here's what the Venezuelan ambassador to the United States said today. He called a press conference and made this rebuttal to the charges.

(BEGIN VIDEO CLIP)

BERNANDO ALVAREZ, VENEZUELAN AMBASSADOR TO US: What they're saying is that presume, that they feel, that probably it might be something happening, we have never received any formal request. Nobody else in the world is accusing Venezuela of such a thing and so it's outrageous and is ridiculous.

(END VIDEO CLIP)

PILGRIM: And Venezuela is a country that has embraced allies that are supporters of terrorism. What's your response to this rebuttal?

MCCAUL: Well as you've indicated, they have embraced state sponsors of terrorism. I think the world needs to stand up to countries like Venezuela and other state sponsors of terrorism who are now aligning themselves against the United States. I mean, Mr. Chavez came into the United States to New York to the United Nations and called the president the devil. I think it's hard to take their words very seriously, given the rhetoric. But when you do look at their words and what they're saying, they do endorse Tehran's nuclear weapons program. They do embrace this idea of the Islamic jihadist. And we do know again that Hezbollah has made a safe haven at Margarita Island.

The general of the U.S. Southern Command basically came out in our report and said there's a growing threat of a risk of terrorism not only in the tri-border area, but also in countries like Venezuela. I think he needs to be taken seriously. That's why we have ramped up appropriations in the Congress to secure the border. But we've got to look south of our border and deal with this threat.

PILGRIM: You know, this brings us right to the issue at hand. Congress has passed the border fence bill, but the president has not signed it yet. What's holding it up?

MCCAUL: I anticipate that he will sign it in the near term. We voted on that, we passed it in the house. The conference report came out with a little bit different language. But the act that we passed, in my view, is superior to that and I think the president will sign that in the near future.

PILGRIM: Congressman Michael McCaul, thank you very much for being with us tonight.

MCCAUL: Thank you.

PILGRIM: A reminder now to vote in tonight's poll. How would you rate the government's handling of the middle class crisis in this country? excellent, fair or poor. Cast your vote at LouDobbs.com and we'll bring you the results in just a few minutes.

And still to come, political scandals in Washington, how they're affecting a key Senate race in Ohio, DeWine versus Brown. And our distinguished panel of political analysts will have that and much more.

Also join us at the top of the hour for our special report, "America Votes 2006: War on the Middle Class." Lou will be reporting live from Kansas City, Missouri. That's at 7 p.m. Eastern.

(COMMERCIAL BREAK)

PILGRIM: Politics, foreign policy dominating the headlines tonight and joining me now with some analysis are three of the finest political minds in the country. Democrat strategist Hank Sheinkopf, Errol Louis, columnist for the "New York Daily News" and from Washington, Diana West, columnist for the "Washington Times." And thank you all for being here.

Let's start with the political climate. We've seen the House Ethics Panel continue to investigate the Mark Foley scandal. We've had a rash of ethics or scandal problems in Congress lately.

How much will that factor into the current races? ERROL LOUIS, NEW YORK DAILY NEWS: Well what we're seeing in the polls is that the core evangelical base that the GOP is relying on is getting more and more discouraged. And that's really all across the country. So you're seeing all kinds of effects in districts where you wouldn't expect to see it, that people are a little bit less confident, a little less interested, a little less likely to turn out to vote. And we'll see effects from coast to coast on election night on this.

PILGRIM: Let's get Diana in on this. Diana?

DIANA WEST, WASHINGTON TIMES: Well, I actually think that people are getting very burned out on the scandal, particularly the Foley scandal, given that the man is in rehab and gone.

But I think that there is disaffection across the board and that may weed out some voters. But I don't think it's going to give the edge to this race. I think there are other issues that the Republicans have problems with besides these scandals.

PILGRIM: More kitchen table issues, Hank?

HANK SHEINKOPF, DEMOCRATIC STRATEGIST: Conduct of the war, the prosecution thereof. Whether you agree with the war or not, the way it's been handled mitigates against one important part of the Republican plank, which is providing national security and being experts on it.

Put the scandals in the mix, put the fact that people are feeling that their government doesn't belong to them, portions of the things we've learned about how Congress operates, committee ships for sale, just makes people feel they're alienated from their government, and that's where the problems are going to come from.

PILGRIM: I don't know about you but I couldn't get through the week without a discussion about which way the Senate will go. What's your view on what's happening with some of these very key Senate seats?

LOUIS: It's just very, very close. We were just playing some of that game while we were waiting to come on. I mean, Pennsylvania looks like it's going to go Democrat. Ohio looks like it's going to go Democrat, the seats that are being contested there. Of the others that are -- of the six, you know, Montana, Missouri and Tennessee, very hard to call in all three of those.

WEST: Very hard to call.

LOUIS: But at least two of those three look like they might in fact go Democrat.

WEST: I do think the Senate is going to hold. I think it's the House that's much more interesting because all these other races, all these other issues, and I think that is where the Republicans have their biggest problems. On issues like national security though, once you get away from the scandalmongering, it does come down to, do you want a policy that keeps us on the offensive or do you want a policy that puts us back on the defensive? And even though the Bush administration is not conducting the war in a meaningful and having a good war at this point, I think that issues like eavesdropping on terrorists are still going to make people think of their national security and will work for the Republicans' benefit.

SHEINKOPF: If you ask the average American whether they're worried about eavesdropping on terrorists, or whether they're worried about the fact that their income in real terms is declining, they'll you what's more important. That's what they're responding to, is a populist trip that is fueled by scandal and fueled by the bad prosecution of this war that is turning people off and moving them to voting against their present incumbents.

And frankly, midterm elections have generally been a contest determining whether the party in power deserves to remain in power.

PILGRIM: Let's look at -- we have some statistics. A new CNN survey, which we have, we can put up for our viewers. It finds that 54 percent of Americans feel that the American dream has become impossible for most to achieve. The American dream, it's a very nebulous concept. This is all very subjective. But yet, it is a factor.

LOUIS: Absolutely. If you translate that into being able to pay your bills and pass on a better life to your kids, you know, in state after state, the big states with mass layoffs, you're talking about Michigan, you're talking about Pennsylvania, you're talking about Ohio and New York, where in each of those states, over 50,000 people have been laid off this year alone. It's not unreasonable for a lot of people to say, hey, I don't know if this is going to work out for me.

WEST: But I would love to know how American dream is defined. Because, is it a matter of not having great wealth? Is that the what the American dream has become? Or is it also perhaps a general disaffection in feeling out of control and feeling that there's a fragility to the American dream caused by this whole war on global terror that's going on? I think that's a very important distinction to think about.

SHEINKOPF: More basic than that, in the places that Errol is citing, people know that those jobs are not coming back, and they don't know what they're going to leave to their children. That's what the American dream is about. Will it be better for the next group of people? They don't believe it.

And they also believe that corporations and other bodies have too much influence in government, making sure the money goes in one direction. It's just that -- it's really pretty clear.

PILGRIM: I'd like to point out another survey that we have. And it's about the feeling about Congress. And the survey found that 74 percent of Americans feel that Congress is out of touch with average Americans. There's this very strong disconnect between the sort of family nucleus and government at this point. Disturbing, isn't it?

LOUIS: Absolutely. and not -- for incumbents it's especially disturbing. And I think what's different here is normally you'll see that people maybe have a disaffection about Congress, but they think that their person is different, their person is OK. That's not really showing up so much in the polls now. People are sort of saying, look, everybody is suspect, everybody seems to be either out of touch or doing the wrong thing or closely associated with somebody who is.

WEST: Well, that's true. And you certainly see out of touch when you have the Senate Minority Leader, Harry Reid coming under scrutiny for land deals that got him a million dollars on land he hadn't owned for a while and living at the Ritz Carlton and using campaign funds to pay Christmas bonuses. I mean these are really turning voters off.

SHEINKOPF: Yes, they're turning voters off. It's a good thing that Harry Reid is in the minority. The problem is this is a referendum on the majority. They control the House, they control the Senate and they control the presidency.

People are saying, look, American dream, not going to happen. What's the future look like and, by the way, I don't really like the war. When you put that together, that's a combustible mix. And people are going to say, hey look, time for change, and they're going to say about their own guy or their own woman in Congress, why didn't you stand up for me against those other fellows. That's the difference.

PILGRIM: Let's go international for a second. In Japan, Secretary of State Condoleezza Rice had this to say about the nuclear crisis.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: I reaffirmed the president's statement of October 9th, that the United States has the will and the capability to meet the full range -- and I underscore full range -- of its deterrent and security commitments to Japan.

(END VIDEO CLIP)

PILGRIM: This obviously to discourage countries in Asia from developing their own nuclear deterrent. And yet the discussion before the North Korean so-called test was that, perhaps, that countries would try to develop their own defenses. That seems to be just done away with at this point.

LOUIS: Well, not just apathy. I think the overall sort of feeling of a policy that's out of control, that's not quite working, that is not palpably making the world safer, or making the nation safer, I think is really what you get from this stuff, that there doesn't seem to be a plan that's working.

SHEINKOPF: Two prongs in the new Republican majority: national offense, secure and strong, new morality in politics. They lost both planks. Where to they go from here?

PILGRIM: Diana, you get the last word.

WEST: Well, I wanted to say something about Japan. I was hoping that Condoleezza Rice would announce that she had allowed Japan to have its own nuclear weapons.

PILGRIM: All right. OK. Another topic for another day. But we will get there.

Thanks very much for joining us.

Diana West, Hank Sheinkopf, and Errol Louis, thank you.

And still ahead, the results of to tonight's poll, more of your thoughts, the latest headlines. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Now the results of tonight's poll. An overwhelming 98 percent of you say that our government is doing a poor job of handling the middle class crisis in this country.

Time now for more of your thoughts.

And Lee in Wyoming writes to us: "I propose Congressional pay be linked to the minimum wage. The Congressional fatcats could still vote themselves pay increases, but minimum wage would increase by the same percentage. Under this scenario, the minimum wage might actually be a living wage."

Mike in South Carolina writes: "I've considered myself to be a Republican for 30 years. I have now to decide to become an independent. It's clear the Republicans have turned on the working men and women who helped make this country what it is.

And finally, Nancy in Texas: "Thank you, Lou Dobbs, for making all these issues front page news. You're an inspiration to us all."

We love hearing from you. Send us your thoughts at LouDobbs.com. And each of you whose e-mail is read here will receive a copy of Lou's new book, "War on the Middle Class".

Now these headlines. The Homeland Security Department tonight says a terror threat against U.S. football stadiums is not a credible threat. Officials warned seven cities about a dirty bomb threat to their NFL stadiums this weekend. They are not recommending that cities increase stadium security. The threat was posted Monday on an Internet site.

A deadly series of attacks against U.S. troops in Iraq. Insurgents killed 11 more of our troops, ten in a single day. So far in October, 68 percent of our troops have been killed. That makes it the second most deadly month so far this year. Military officials blame the casualties on the month of Ramadan and ongoing security crackdowns in Baghdad. Secretary of State Condoleezza Rice is in Asia. She's meeting with U.S. allies about North Korea's nuclear test. Secretary Rice told officials in Japan that the United States will stick to its commitment to defend its allies in the region. The concern is that several Asian countries may embark on their own nuclear programs.

That's the very latest from New York. Now back to Kansas City for a LOU DOBBS TONIGHT special report, "America Votes: 2006, War on the Middle Class".

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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